Following best practices, SGI members develop clear investment guidelines that set financial targets while highlighting their values and priorities regarding the management of their portfolio. They require their portfolio managers and investment consultants to integrate environmental, social and governance (ESG) issues into their asset allocation and investment decision-making and report on their performance in their regular meetings with investment committees or treasurers.
Socially responsible investment (SRI) strategies have evolved from simple negative screens (i.e. excluding sectors or companies related to weapons of mass destruction or pornography) to pursuing positive screens by investing in sectors or companies with positive ESG performance (e.g. renewable energy, women or minority-owned businesses). Some of our members dedicate a portion of the portfolio to support theme or impact investing in pursuit of a social as well as a financial return (e.g. inner city community development, grocery stores in food deserts). More recently, many of our members are taking a holistic approach by systematically integrating ESG factors (e.g. transparency, climate change, human rights, equality, political spending, etc.) in their selection process across all asset classes.
SGI members work in coalition to pursue direct corporate and public engagement. This provides an opportunity to enter into constructive and persuasive dialogue with companies and policymakers, expressing concerns, offering suggestions and working together to encourage sustainable policies and practices. Some of our engagement efforts occur behind the scenes through meetings with company board members and management. Other engagements are more public involving multi-stakeholder efforts such as roundtables and collaborative project. One such collaboration is the Farm Labor Practices Group; it brings together all the key actors of the tobacco supply chain in the U.S. in an effort to ensure basic human rights for farm workers, the majority of whom are undocumented.
Another tool at members’ disposal is shareholder proposals or resolutions. While not the primary engagement approach, filing shareholder resolutions escalates concerns and recommended actions to the attention of top management, board members and other shareholders on an issue that poses a serious risk or opportunity to the company. Companies can attempt to exclude proposals from their proxy statements for many reasons outlined in the Securities and Exchange Commission regulations, such as those they believe relate to ‘ordinary business’ or that is ‘essentially completed’. Proponents of the proposals can improve the vote by making presentations to proxy voting services (e.g. Glass Lewis, International Shareholder Service); submitting proxy memos or exempt solicitations through the SEC; direct outreach to large asset owners/asset managers; or organizing press campaigns / media outreach.
Shareholders who have a resolution before a company must present the resolution in person or by proxy at the company’s annual general meeting. This enables our members to address their concerns before the Board of Directors, management and other stakeholders. Most shareholder proposals are non-binding to company management, but can lead to board pressure to change corporate practices. Strong proxy votes on shareholder resolutions can also translate into leverage in future dialogues. Visit ICCR and US SIF for more details on shareholder resolutions.
A key tenet of SRI is the voting of proxies. Proxy voting gives shareholders a say in the workings of corporations, allowing those who own the company to decide on matters of corporate governance. Since most stockholders are unable to attend a company’s annual general meeting, they are able to vote on these matters by proxy. Reviewing both company and shareholder sponsored resolutions is critical in supporting good governance and effective socially responsible practices. Ceres published guidance on Proxy Voting for Sustainability that is a helpful resource. ICCR issues an annual Proxy Resolutions and Voting Guide detailing the resolutions filed by its members for that year’s proxy season. Another resource for proxy voting is the Proxy Preview released annually by As You Sow, the Sustainable Investments Institute (Si2), and Proxy Impact, which lists the specific shareholder resolutions and lays out major themes.